Amazon announced Q1 2010 results last night and held an analyst conference call (transcript here). I wanted to surface some interesting tidbits from both. FYI EGM stands for Electronics and General Merchandise – basically the non-media part of Amazon’s e-commerce retail business.
Follow the GMV growth
First, I always like to look at sales trends in the four segments that Amazon reports against (always ex-FX to strip out the impact of currency rate fluctuations):
There’s been a lot of talk on Wall St. about Amazon not exceeding expectations and maybe the growth story is over, etc. I’m not in the expectation business, but looking at Amazon’s Q through the e-commerce lens, all I see is continued growth, heck accelerating growth!, and it looks like Amazon keeps finding more gears to the engine to continue to pull away from the competition.
- Amazon saw material acceleration in its domestic business and EGM segments (Domestic I’m sure was due to EGM).
- Overall Amazon’s y/y growth rate was 42%, up 5% from the Q409 period – this acceleration happened during a non-holiday period folks!
Why is Amazon accelerating?
Amazon doesn’t give enough information to be able to specifically say that X was the source of growth, but reading between the lines and the body language on the call, here are the top three initiatives that seem to be bearing fruit:
- Amazon grew units at 40% y/y – truly amazing and the heart of the growth engine.
- Amazon Prime – This program celebrated it’s fifth year domestically, but is very nascent internationally. Also domestically they really put their foot on the gas about 18 months ago – I believe all segments are enjoying increased purchase frequency from Prime. Our estimates put Prime at a 5-7% penetration of users, BUT the Prime users are generally 2-10X as active as non-prime, so they represent 12-20% of Amazon sales now.
- Merchandising – Amazon has made several interesting tweaks to merchandising that are bearing fruit and driving that per customer GMV up.
- 3p – This program continues to be on fire. As mentioned we are seeing 55% SSS growth, the absolute number is so large, I can only call it monsterous.
Amazon Web Services (AWS) starting to get some love
Earlier in the quarter, Amazon held an AWS conference that Citi had an interesting report on. I noticed in the PR and the call, they mentioned AWS more than previously. AWS is Amazon’s cloud computing initiative that I think is significantly under-hyped. I talk to a LOT of startups and Amazon is the standard in cloud computing for that group as well as many larger companies such as Netflix. This business has to have huge margins compared to core and it will be interesting to see if/when it starts to contribute and Wall St. wakes up to it.
Amazon’s share gains accelerate – or ‘Eat our Dust’
Jeetil Patel at DB has a great chart in his Amazon report replicated here that graphs e-commerce growth (as reported by comscore) against Amazon as well as overall retail sales.
As the two largest players in e-commerce, it’s important to compare the growth rates of Amazon and eBay to understand where the share is going. As reported on sister-site, eBay Strategies, eBay grew at 8% in Q1 – a flat performance vs. Q409. Compare that with Amazon printing a 42% growth quarter on top of 37% last Q and you have Amazon going from a 29% growth advantage in Q409 to a 34% growth advantage.
Amazon is pulling away from eBay every quarter and thus taking share at an accelerating pace. In isolation, I think the changes eBay is making to regenerate growth are prudent, but in a world with Amazon as a competitor, they seem too small and incremental to even stem the bleeding, much less catch up.
Graphically if you imagine eBay at 8% for the last two Q’s on the chart above, you can see the gap growing visually.
Other interesting tidbits
- For the first time in Amazon history, EGM revenue surpassed media
- Active sellers on Amazon grew 22% to 2m
- Active buyers grew 25% to 114m (this is a metric eBay has struggled to make any progress with)
- Revenue/customer grew to $65 (19% y/y increase)
- 3P stayed steady at 31% of units (but had to grow 40% y/y to stay there as units grew 40%)
- Amazon added 1,800 people in the quarter! (wow)
- They specifically talked about investing in FBA capacity on the call
- Q1 Capex grew to $140m – that’s a lot of servers, I wonder if this is AWS growth related.
What did you think?
Sound off in comments if you have any interesting thoughts on Amazon’s Q or insight into the eBay/Amazon battle.
Seeking Alpha Disclosure – I am long Amazon and Google. eBay is an investor in ChannelAdvisor.